tede02

Great discussion. This article has some eye opening numbers around how big indexing has become. http://www.thinkadvisor.com/2014/09/29/the-perils-of-the-indexing-crowd The quote that really resonated with me was: "It is a law of investing that when something very successful starts to become too popular, past a certain point, risks will form where none existed before." One of the problems also seems to be defining indexing as one specific thing. Market-cap weighted indexes surely will have different effects on the market than will an equally weighted index. Also, these days there are ETFs that track very specific sectors and individual countries. This seems to complicate the issue further.

Have you ever thought about possible unintended consequences of indexing? Today the WSJ reports that Vanguard saw inflows of $214 billion in 2014 alone. I’ve been thinking about this issue more recently. Will market dynamics change somehow as more and more “mind-less” money gets sloshed around (or is most of the money already mind-less)? Will market-cap weighted indexes add to the bubble effect and boom and bust cycles? (For the record, I’m not against passive investing at all. It seems like a very sound strategy for many individuals with no interest or time to actively manage their investments).

I had the B of A card previously and didn't have a great experience. The system they are using to determine if you purchase gas or groceries is flawed. I found that only about half of the fuel stations I used would result in the 3% reward. The same held true for groceries. As I understand it, the company is using merchant codes which are not precise at all. The card program doesn't know what you're buying if you purchase groceries from say Wal-Mart, Target or Costco for example (and thus the reward defaults to 1%). I canceled the card in favor of Fidelity's which is 2% cash back on all purchases.

I would suggest looking at a thread from several weeks ago titled "Cash 'equivalent' investments." It was 4 pages in last time I looked.

I think Peter Lynch's books are a better place to start for the lay investor. A lot less investment jargon. It's been quite some time since I read any of them but I don't recall any specific discussion of margin of safety. As I recall, Lynch really emphasizes thinking about stocks as businesses. He also emphasizes keeping it simple by investing in companies you're familiar with (you use their products for example). For someone who doesn't know the difference between a balance sheet and an income statement, I think Ben Graham's books would be too much.

I searched the board before posting. I just realized today that Oaktree has entered the mutual fund business: http://www.bloomberg.com/news/2014-09-15/oaktree-to-start-first-mutual-funds-to-woo-individuals.html This is very interesting to me. Finally a chance for us mortals to get direct exposure to Oaktree's strategies. Wondering how close these strategies will resemble the firm's traditional private offerings.

I took a small position in Lukoil today. It appears I missed the bottom by several weeks. Nonetheless, it still seems very cheap. I'm only taking a small position due to the political uncertainly which is anyone's guess.

Here's a good quick read on Broadridge: http://www.forbes.com/sites/steveschaefer/2013/10/30/the-broad-reach-of-broadridge-the-most-important-financial-firm-youve-never-heard-of/

Everyone faces this challenge right now (and has for the last several years). One instrument I've used is adjustable rate government bond funds. The funds are basically comprised of adjustable rate mortgage securities that are insured by Freddie or Fannie. No credit risk, virtually no interest rate risk. The yields aren't that great but they are better than cash and you have liquidity. One example is http://quotes.morningstar.com/fund/f?t=FAUZX&region=usa&culture=en-US.

Two businesses that I perceive with extremely wide moats are Broadridge Financial Solutions (BR) and Morningstar (MORN). Broadridge essentially has a monopoly within investor communications for public companies such as sending regulatory information and administering proxy votes. Morningstar simply has a very strong brand. In my view, no company rivals the firm when it comes to rating mutual funds and ETFs. The brand extends to investing platforms for financial advisers and the company even manages money using all of their data. If I could turn the clock back, I would have loaded up on both in 2008-2009. Both are pretty pricey today.

At 30, I barely qualify to reply here. Nonetheless, one regret I have (other than the hot sex regret) is not getting more "hands-on" investing experience in my 20s. I've had a brokerage account since I was 18 and bought some stocks and mutual funds along the way. However, once I started reading Buffett, I kind of got locked into this mindset that I needed to read every book in existence about value investing and so on before I was ready to do it myself. As others here have said, you can only learn so much from reading. You have to get in the game yourself to gain experience and learn from your mistakes. So the lesson is start early and don't be afraid to fail. I also would add that I regret selling two of my favorite businesses after the share prices had appreciated dramatically. That was back at the end of 2012. I rationalized the sale for tax reasons. Both companies should have resided in my portfolio as permanent holdings. Since I sold, the price of each has just gone up and the proceeds from the sales have been sitting in cash.

Good article in today's WSJ about someone who has very successful in the refinery business: http://www.wsj.com/articles/boss-talk-pbf-energy-keeps-focus-on-growth-1418766312?mod=wsj_boss_talk Looking briefly, it appears refinery businesses operate on razor thin margins.

One thing that doesn't seem clear to me is if Berkowitz is in-fact getting out. All the reporting seems to indicate he is selling but I've also read that somehow he doesn't have to report his ownership? Has this been confirmed one way or the other?

Bought a little bit of GNW today.

This may be a controversial statement on this board but I'm a bit surprised that The Intelligent Investor seems to number as the most influential. I've read the book and it remains on my bookshelf, but I found it kind of boring (I don't know how else to put it). However, I did not read the book until I had read three books by Peter Lynch and two books about Buffett. I think in this context, it's understandable. I also found what Charlie Munger said somewhat recently about Ben Graham kind of interesting: http://blogs.wsj.com/moneybeat/2014/09/12/a-fireside-chat-with-charlie-munger/

In no particular order: 1. One Up On Wall Street 2. The Warren Buffett Way 3. The Little Book That Beats the Market 4. The Snowball & Buffett: Making of an American Capitalist 5. The Signal & the Noise Of course all of the Berkshire Letters and Howard Marks memos are priceless as well.

I covered my Netflix short somewhat recently.

I will happily be comfortably poor! I'm guess I probably already am. It's hard to complain much when the median household income in the US is $50k. That blows my mind every time I see it. Again, that is household income, not individual.

Modeling 10 years out seems like a joke to me. There is just way too much randomness to account for. Go back to the year 2000, The US was projected to have paid off all of it's debt within the next decade, look what really happened. At the same time, who was talking about Apple? Now the company is the most valuable in the world (by market cap). How many people had heard of Google in the year 2000? I'd love to see the cash flow projections of retailers going back a decade.

Those paragraphs are awesome. Thanks for posting. As someone with perfectionist tendencies, I've always struggled with thinking I need to memorize a 10k before I make a decision. I've learned more and more over time that its really about getting the big idea right. So much of everything else is just noise.

Rob Arnott of Research Affiliates created the fundamental weighted index. They are currently distributed through PowerShares. I really like the concept as it addresses the main problem with market cap weighted indexes (the heaviest weightings tend to be toward the most expensive stocks).

Sorry, but all I can think of when I read "Contra" is up, up, down, down, left, right, left, right, select, start. ;D

There's a good little article in today's WSJ: http://online.wsj.com/articles/16-rules-for-investors-to-live-by-1417789469?mod=WSJ_hps_MIDDLE_Video_Third This little excerpt struck a chord with me: "Fourteen years ago, Enron was on Fortune magazine’s list of the world’s most-admired companies, Apple was a struggling niche company, Greece’s economy was booming, and the Congressional Budget Office predicted the federal government would be effectively debt-free by 2009. There is a tendency to extrapolate the recent past, but 10 years from now the business world will look absolutely nothing like it does today."

I didn't read the full link so forgive any out-of-line comments. I'm not sure I like the question because you could be good or bad and still take concentrated bets (though you wouldn't last long as a money manager if you were bad). Generally speaking, I'm of the view that less skilled managers are more likely to be benchmark huggers. If you aren't good, its easy to just stick with the herd, be average at best and keep collecting a paycheck. If you truly are skilled, you don't want a portfolio that is spread out it diversifies away all of your winners. You want to make bets that will have a material impact. Diversification is the enemy of out-performance.

Individual stocks suggested as "must haves" at the coffee shop, bar or at a holiday gathering should all be considered for short positions! ;D Reminds so much of what Peter Lynch's favorite example. If everyone at a cocktail party is talking about how great stocks are, its probably the worst time to buy and so-forth. That said, I've personally witnessed investor sentiment change among our client base over the past 18 months. People have wanted more exposure to stocks (foolishly chasing returns). However, the mentality isn't madness. I haven't had anyone with piles of cash or fixed income holdings demand to be shifted 100% into equities.